9 zibermr vol1 issue 2

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ZENITH International Journal of Business Economics & Management ResearchVol.1 Issue 2, Nov 2011, ISSN 2249 8826Online available at http://zenithresearch.org.in/

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earch.org.in

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UNDERSTANDING THE POTENTIAL OF RURAL MARKETING

IN INDIA - AN ANALYTICAL STUDY

MD RAFIUDDIN*; DR. BADIUDDIN AHMED**

*Assistant professor, Department of management Studies,Lords Institute of Engineering and technology, Sy. no. 32 Golconda Post,Himayath Sagar, Hyderabad-500008 India.

**Associate Professor & Head, Department of Management and Commerce,LHC Room No. 213, first floor, Maulana Azad National Urdu University,

Hyderabad- 500032 India.

ABSTRACT

Fast pace of technology advanced every sphere of social, economic, political cultural life,produce, reduce costs, distribute, and expect higher profits. The focus is on tapping the ruralmarkets. Urban markets have saturated lied to look rural markets. This paper presents a review of

rural markets environment, Problems and strategies in India. Rural marketing has become thelatest mantra of most corporate even MNCs are eyeing rural markets to capture the large Indianmarket. The rural market consist 70 percent population, twice as entire market of USA andwould become bigger than total consume r market in countries like South Korea/Canada inanother 20 years. Using primary and secondary data collected from various market segments. Itexhibits linguistic, regional and cultural diversities and economic disparities. Increase inpurchasing power fuelled lot of interest, several companies are exploring cost effective channelslike HUL/ITC/Colgate/Godrej/Nokia/BPCL.

KEYWORDS: Rural Marketing, Rural Mindset, Rural Market Potential, RM Levels.______________________________________________________________________________

INTRODUCTION

742 million Indians constituting 138 million households reside in 6,38,365 villages (Census,2001). The size of rural market itself speaks of its potential. The current marketing environmentand economic scenario have brought the corporate under contemporary roofs of modern India,which is challenging the current standards of segmenting, targeting and reaching the customers.Realistically, India as a nation has come a long way from the place where only urban populationwhich constitutes 20 per cent of customer base for companies are responsible for 80 per cent oftheir profits. The companies are looking for new opportunities and avenues, as they arewitnessing a decline in their growth rates in urban markets due to market saturation and they do

have a huge, untouched and untapped rural Indian market. The driving force for this is ruralyouth who are educated, have access to technology and have openness to change. Also ruralmarkets have acquired significance, as the overall growth of economy has resulted intosubstantial increase in the purchasing power of the rural communities. A survey by India'spremier economic research entity, National Council for Applied Economic Research (NCAER)indicates that rise in rural incomes is keeping pace with the rise in urban incomes. The ruralmiddle class is growing at 12 per cent, close to the urban middle class which is growing at 13 per


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cent. Punjab, Kerala, Haryana, Rajasthan, Gujarat, Andhra Pradesh and Maharashtra areconsidered highly prosperous states.

OBJECTIVES

1. To understand the rural market.2. To unleash the potential of rural market.3. To assess the paradigm shift from urban to rural market.4. To analyze the various parameters of potential of rural market.5. To offer the conclusions.

METHODOLOGY

An exhaustive questionnaire was structured to gather as much primary information aspossible and hence, the most common form of research, descriptive research was used. Apreliminary study in the form of informal interviews with 107 persons was conducted. Secondarydata collected from various market segments and other players of the market, and randomlycollected printed promotional material across the countryside.

WHAT IS RURAL?

B.N. Garudachar, general manager, corporate communication and investor relations atVoltas, a Tata group company in air-conditioning and engineering services. "These are: lowpopulation numbers, low median income, poor infrastructure [roads, electricity,communications], and agrarian rather than industrial activity. Such rural areas are within the

sphere of influence of neighbouring cities and metros.

SALIENT FEATURES OF RURAL INDIA

Some common characteristics that do exist amongst most of the rural markets in India are asfollows.

A. POPULATION: 83.3 per cent of the villages have a population of less than 2000 (Census ofIndia 2001)

B. LEVELS OF EDUCATION: Although the percentage of literates has increased from 36 in1981 to 59in 2001, there is still approximately 60 per cent of the rural population who liesbelow themiddle education bracket. (Kashyap & Raut, 2010)

C. OCCUPATIONAL PATTERN: Almost 76 per cent of the rural population depends oncultivation orwages for their living (NCAER, 2002).

D. CHARACTERISTICS: in terms of occupation, consumption and buying behaviour changeprominently from urban to rural in locations with population more than 10000.


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RURAL MARKETING IN MODERN INDIA

Rural Marketing is defined as a function that manages all activities involved in assessing, stimulating and converting the purchasing power of rural consumers into an effective demand forspecific products & services and moving these products & services to the people in rural areas tocreate satisfaction and a better standard of living and thereby achieving organizational goals (Iyer, 2010). The process should be able to straddle the attitudinal and socio-economic disparitybetween the urban and rural customers.

URBAN TO RURAL (U 2 R): A major part of rural marketing falls into this category. Itincludes the transactions of urban marketers who sell their goods and services in rural areas, likepesticides, fertilizers, seeds, FMCG products, tractors, bicycles, consumer durables, etc.

RURAL TO URBAN (R 2 U): Transactions in this category basically fall under agriculturalmarketing where a rural producer seeks to sell his produce in an urban market, like seeds, fruitsand vegetables, milk and related products, forest produce, spices, etc.

RURAL TO RURAL (R 2 R): This includes the activities that take place between two villagesin close proximity to each other, like agricultural tools, handicrafts and bullock carts, dressmaterials, etc.

The McKinsey report (2007) on the rise on consumer market in India predicts that intwenty years the rural Indian market will be larger than the total consumer markets in countriessuch as South Korea or Canada today, and almost four times the size of todays urban Indianmarket and estimated the size of the rural market at $577 Billion.

TABLE 1: RURAL POPULATION STATISTICS

Population Number of Villages Percentage of total villages

Less than 200 114267 17.9

200-499 155123 24.3

500-999 159400 25

1000-1999 125758 19.7

URBAN RURAL

RURAL URBAN

RURAL RURAL


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2000-4999 69135 10.8

5000-9999 11618 1.8

10000 & above 3064 0.5

Total 638365 100

Source: Census 2001

ATTRACTING ATTRIBUTES OF RURAL MARKETS

TABLE 2: ESTIMATED ANNUAL SIZE: RURAL MARKET

FMCG INR 65000 crore

Durables INR 5000 crore

Agri-inputs (including tractors) INR 45000 crore

Two / Four Wheelers INR 8000 crore

TOTAL INR 123000 crore

Source: (Francis Kanoi, 2002)

The immense potential of the rural market can be realized if the marketers understand thismarket. The huge untapped needs of the rural mass, the growing rural economy and theincreasing media penetration and brand awareness make this market extremely attractive to

marketers (Goswami, 2009). A look at the estimated annual size of the rural market would makeus understand the true potential of this untapped market. The growth statistics for FMCG andConsumer Durables sector suggests huge potential for the Indian Rural markets(Paninchukunnath, 2010).

UNDERSTANDING THE POTENTIAL OF RURAL MARKET

1. LARGE POPULATION: 742 million Indians constituting 138 million households reside in6,38,365 villages (Census, 2001). The size of rural market itself speaks of its potential

2. GROWTH IN MARKET: The market has been growing at 3-4% per annum adding morethan one million new consumers every year. Consumer is brand loyal and understandssymbols better. View it as you may, few people dispute that the rural market is massive.According to Singh, 12.2% of the world's consumers live in India. "Rural households form72% of the total households. This puts the rural market at roughly 720 million customers."Gupta of TSMG extrapolates the Census 2001 numbers and comes up with an estimate of790 million. "Total income in rural India (about 43% of total national income) is expected toincrease from around US$220 billion in 2004-2005 to US$425 billion by 2010-2011, aCAGR of 12%," he says.


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3. IT PENETRATION IN RURAL INDIA: Today's rural children and youth will grow up inan environment where they have 'information access' to education opportunities, examresults, career counselling, job opportunities, government schemes and services, health andlegal advice and services, worldwide news and information, land records, mandi prices,weather forecasts, bank loans, livelihood options. If television could change the language of

brand communication in rural India, affordable Web connectivity through various types ofcommunication hubs will surely impact the currency of information exchange. As theelectronic ethos and IT culture moves into rural India, the possibilities of change arebecoming visible.

4. IMPACT OF GLOBALIZATION: The impact of globalization will be felt in rural India asmuch as in urban. But it will be slow. It will have its impact on target groups like farmers,youth and women. Farmers, today 'keep in touch' with the latest information and maximizeboth ends. Animal feed producers no longer look at Andhra Pradesh or Karnataka. They keeptheir cell phones constantly connected to global markets. Surely, price movements andproducts' availability in the international market place seem to drive their local businessstrategies. On youth its impact is on knowledge and information and while on women it stilldepends on the socio-economic aspect. The marketers who understand the rural consumerand fine tune their strategy are sure to reap benefits in the coming years. In fact, theleadership in any product or service is linked to leadership in the rural India except for fewlifestyle-based products, which depend on urban India mainly.

5. INCREASING INCOME AND PURCHASING POWER: The agricultural developmentprograms of the government have helped to increase income in the agricultural sector. Thesein turn have created greater purchasing power in rural markets.

6. ACCESSIBILITY OF MARKETS: The attraction of a market depends not only on itspotential but also on its accessibility.The road network has facilitated a systemized product

distribution system to villages. An increasing number of companies are supplying villagemarkets directly. Increasing direct contacts to villages helps product promotion andavailability of the product in the village shop.

7. CONSUMER BEHAVIOUR CHANGES: Increased literacy and greater awareness in ruralmarkets create new demands and discriminating buyers. This is observed more in theyounger generation. In villages today, this segment of buyers consumes a large variety ofproducts, both durables and non-durables. There is a visible increase in the consumption anduse of a variety of products, which is easily observed.

8. COMPETITION IN URBAN MARKETS: Intensified competition in urban marketsincreases costs and reduces market share. The rural markets are therefore increasinglyattractive in relation to urban markets. The automobile market brings this out clearly. Rajdootmotorcycles, Bajaj scooters or Ambassador Cars find ready acceptance in rural markets ascompared to urban markets where there is a proliferation of brands.

9. NEW EMPLOYMENT OPPORTUNITIES: Government schemes like IRDP (IntegratedRural Development Programme), JRY (Jawahar Rozgar Yojana) and TRYSEM (TrainingRural Youth for Self Employment) have created new employment opportunities in Rural


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India. Co-operative banks and Public sector banks are extending loans to rural people,thereby creating job opportunities for them. As a result very few rural people are nowflocking to urban centres.

10.GREEN REVOLUTION: The vision of Dr. Swami Nathan, the father of the greenrevolution to achieve self-sufficiency in food grain production in 1995, gave a majorbreakthrough in food grain production by the use of scientific methods in agriculture. Atpresent, Rural India generates 299 million tons annually.

11.VARIOUS GOVERNMENT POLICIES: The governments stress on self-sufficiencyresulted in various schemes like Operation Flood (White Revolution), Blue Revolution,Yellow Revolution, etc. resulted in the production of 15 million tons of milk per annum.

12.BETTER CREDIT FACILITIES THROUGH BANKS: With co-operative banks takingthe lead in the rural areas, every village has access to short, medium, long-term loans fromthese banks. The credit facilities extended by public sector banks through Kisan Credit Cardshelp the farmers to but seeds, fertilizers and every consumer goods on instalments.

13.GREEN CARD / CREDIT CARD FOR FARMERS: The government initiated creditcards for farmers through public sector banks. Canara bank and Andhra bank were thepioneers in the launch of the Kisan Credit Card. The farmer had a choice to take short ormedium term loans through these credit cards to buy seeds, fertilizers, etc. This enabled himto produce more and thereby increase his income.

14.IMPROVED EXPORTS DUE TO EXPORT POLICY: The new Export Policy 2000paves the way for open market (OGL- Open General License System) status for agriculture.The World Trade Organizations (WTO) Policy for agro-exports has increased exports ofIndian agricultural produce thereby increasing incomes of the rural population.

15.REMITTANCES FROM INDIANS WORKING ABROAD: These remittances are asizeable contribution to growing rural income & purchasing power.

16.POLITICAL & SOCIAL CHANGES THROUGH FAVOURABLE GOVERNMENTPOLICIES: The Indian Government launched a number of schemes like IRDP (IntegratedRural Development Programme) and REP (Rural Electrification Programme) in the 1970s,which gave a boost to the agrarian economy. This resulted in changes in peoples habits and

social life. REP gave impetus to the development of consumer durable industry.

17.MEDIA: Mass Media has created increased demand for goods and services in rural areas.Smart marketers are employing the right mix of conventional and non-conventional media tocreate increased demand for products. The role cable television has been noteworthy inbringing about the change in rural peoples mindset and influencing their lifestyles.


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RURAL MARKETING IS MARKETING TO A RURAL MINDSET; NOT A RURAL

MARKET

Unfortunately, there exists only the practice of rural marketing and very few instancesof understanding the rural mindset. Assumptions, generalizations and stereotypes replace

insights and the extra effort needed to think rural.

A starting point to making our understanding more real is by breaking a few mythsaround rural consumers. A few commonplace assumptions that (mis)guide rural marketingthought. This piece of writing is an attempt to quash those and understand the implications of therealities they shroud.

SAMPLE

The respondents in the sample consisted of rural and sub-urban consumers. 107respondents in and around the border areas of Hyderabad, Bidar were interviewed. Therespondents had certain exposure to the urban lifestyle. The details of the demography of the

respondents are depicted in numbers in the form of Tabulation. The sample size was goodenough to understand the psychographic characteristics of rural consumers in the perspective ofverbal and non-verbal communication strategies.

INFERENCES

The outcome of the study can be analyzed for each of the questions asked in theinterviews. Each of the questions covers different aspects of the potential area in rural marketing.The analysis is as follows.

TABLE 3: RESPONDENTS AGE

Response No. of Respondents % of Respondents

Less than 20 years 09 8.43

21-30 years 20 18.69

31-40 years 33 30.84

41-50 years 28 26.16

50 years and above 17 15.88

Total 107 100

A question was administered to sample of respondents describing the age. The 30.84% havingage group 31-40 years and 26.16% with age group 41-50 years, constituting rural market. By andlarge 76% with 21-50 years of age group, forms the potential market.


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TABLE 4: RESPONDENTS GENDER


Male 69 64.48

Female 38 35.52

Total 107 100

Gender wise analysis shows that 64.48% respondents are male and rest of them are females. Itmeans rural markets are being dominated by male folk.

TABLE 5: RESPONDENTS EDUCATION


Less than V 01 0.93

Till VII 37 34.57

Till X 29 27.13

Till XII 18 16.82

Graduation 14 13.08

Beyond Graduation 08 07.47

Total 107 100

The above reveals the respondent educational background. It is evident that the majority of therespondents are having the education between VIIXII. Which constitute the rural market.

TABLE 6: RESPONDENTS MONTHLY INCOME


Less than Rs. 2000 12 11.21

Rs. 2001 - Rs. 5000 37 34.57

Rs. 5001 - Rs. 8000 26 24.32

Rs. 8001 - Rs. 10000 14 13.08


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Rs. 10001 - Rs. 15000 12 11.21

More than Rs. 15000 06 05.61

Total 107 100

It is found that monthly income of the respondent ranging between Rs. 2000 and Rs. 10000,which is an indication of the respondents affordability of making purchases.

TABLE 7: PREFERRED MODE OF COMMUNICATION


TV 48 44.87

Mobile 03 2.83

Radio 11 10.28

Announcements 08 7.47

News paper 06 5.61

Poster 05 4.68

Word of mouth 19 17.77

Skits/plays 07 6.55

Total 107 100

Advertisements through television and use of Viral marketing as communication mode are mostdesirable. Rural communication depends on two major factors Creating Awareness andInducing Trials. With the penetration of television media increasing rapidly, the rural consumersare becoming more aware of brands through advertisements.

TABLE 8: PURCHASE PRACTICES


Personal 22 20.56

Small Group 28 26.17

Mass 57 53.27


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Total 107 100

The purchase practices of rural consumer are shown in above table. It is evident that 53.27% ofconsumers practices mass purchasing. The small group practices and personal purchase practicesconstitute 26.17% and 20.56% respectively. The effect of mass media is evident here.

TABLE 9: MARKETING STRATEGY


Urban 66 61.68

Rural 03 2.80

Both 38 35.52

Total 107 100

Marketers can benefit most if they can make the rural people feel that they value them as theircustomers. The key success to an effective rural marketing is that it should be firmly grounded inrural tradition, rural perspectives, rural mentality and their values. It requires complete focus onlocal language, culture, customs and modes of communication.

TABLE 10: EFFECT OF LANGUAGES


Regional 77 71.96

National 13 12.14

Both of them 11 10.28

None of them 06 5.62

Total 107 100

It is obvious from the above that regional languages are preferred in marketing. The success ofrural marketing depends on the appropriate localization of campaigns and regional languageplays an important part in it.


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TABLE 11: PURCHASE INFLUENCERS


Price/Discounts 29 27.10

Brand/Company Name 35 32.71

Celebrity endorsement 17 15.88

Language 11 10.28

Content 09 8.41

Tagline 06 5.62

Total 107 100

The result depicts the increasing trend of disposable income in rural areas. Prices and discountsare not the sole parameters that drive their purchases. Rural customers are increasingly becomingbrand conscious.

TABLE 12: PURCHASING DECISIONS


Self 41 38.31

Parent 23 21.49

Spouse 28 26.16

Children 15 14.04

Total 107 100

Above table reveals that the decision making in the rural market are taken by self followed byspouse. No particular tactic can be derived out of this, rather the idea is to target the individual orthe spouse or the child as per the product types and categories.


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TABLE 13: PERCEPTION ON NEW PRODUCT/BRAND


No effect, stick to existing one 28 26.16

Experiment with the new one 09 8.43

Try out when dissatisfying with existing one 24 22.42

Try out on receiving positive feed back 46 42.99

Total 107 100

The study shows that the rural consumers usually do not experiment with a new product unlesssomething triggers them. The most influential triggering factor is positive feedback about the

product from others.

CONCLUSION

1. Age wise analysis explains the pattern of purchasing in the rural markets where in the agegroup between 21-50 years is dominating, with majority of males persons.

2. Advertisements through electronic media are preferred over other method ofcommunication.

3. Marketers can benefit most if they can make the rural people feel that they value them astheir customers.

4. Regional languages are playing vital rule in the rural marketing.5. Rural customers are increasingly becoming brand conscious as well as price and

discounts.

6. The decision making in the rural market are taken by self followed by spouse.7. the rural consumers usually do not experiment with a new product unless something

triggers them

From the study it can be concluded that there a high potential in rural India but exists majordifferences between the existing and the desirable levels of rural marketing, has to be improve asmentioned in the figure below.


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EXISTING DESIRABLE


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REFERENCES

1. Babu, S. Dhineshet al (2008), Emerging Trends in Rural Marketing,www.bmsgroup.blog.co.in/files/2008/07/final-pro.doc

2. Del Castello, Ricardo, Maul Braun (2006), Framework for effective rural communicationfor development

3. Goswami, Rahul (2009) Making sense of the rural rush,http://www.indiatogether.org/2009/apr/eco-ruraleco.htm

4. Iyer, Vidya (2009-2010), Rural Marketing, SIES Journal of Management, Vol. 6, Iss. 2;pg. 110, 4 pgs

5. Jha, M., (April 1999) Rural Marketing: Some Conceptual issue Rural Scan, vol. I no.26. Kashyap, Predeep and Raut, Siddhartha (2010 ed.), The Rural Marketing Book7. Lane, Bernard, Kenji Yoshinaga (1994), Niche markets for the rural world, The OECD

Observer. Paris: Oct/Nov 1994. , Issue no. 190; pp. 14Vishwanathan, Gomathi, Challenges

in Rural Marketing,http://EzineArticles.com/?expert=Dr._Gomathi_Viswanathan

8. Wright, Kimberly Anne (2001), Consuming identities: Global advertising, marketing andcultural identity in India, issue no. AAT 3041323, pp 256

9. Jha, Neeraj (2000), "Gung-ho on rural marketing", The Financial Express, June 1910.Krishnamurthy, Jagadeesh (2009), Yeh Rural Kya Hai? The Challenges and Opportunities

of Marketing in Rural India, EF, December

11.Paninchukunnath, Ajith (2010), 3P Framework: Rural Marketing in India, January March, pp 5467

12.Business World, The Marketing Whitebook 2010-201113.Mirchandani, Rahul (2006), Evolving a New Marketing Mix for Selling to Rural Indians,14.http://knowledge.wharton.upenn.edu15.http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=438616.www.trai.gov.in17.http://www.rbi.org.in18.http://news.in.msn.com/national/article.aspx?cp-documentid=5090652
http://www.bmsgroup.blog.co.in/files/2008/07/final-pro.dochttp://www.indiatogether.org/2009/apr/eco-ruraleco.htmhttp://ezinearticles.com/?expert=Dr._Gomathi_Viswanathanhttp://ezinearticles.com/?expert=Dr._Gomathi_Viswanathanhttp://knowledge.wharton.upenn.edu/http://knowledge.wharton.upenn.edu/http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4386http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4386http://www.trai.gov.in/http://www.trai.gov.in/http://www.rbi.org.in/http://www.rbi.org.in/http://news.in.msn.com/national/article.aspx?cp-documentid=5090652http://news.in.msn.com/national/article.aspx?cp-documentid=5090652http://news.in.msn.com/national/article.aspx?cp-documentid=5090652http://news.in.msn.com/national/article.aspx?cp-documentid=5090652http://www.rbi.org.in/http://www.trai.gov.in/http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4386http://knowledge.wharton.upenn.edu/http://ezinearticles.com/?expert=Dr._Gomathi_Viswanathanhttp://www.indiatogether.org/2009/apr/eco-ruraleco.htmhttp://www.bmsgroup.blog.co.in/files/2008/07/final-pro.doc

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